New proposal would extend period over which firms must hold an asset before it is eligible for long-term capital gains rate

An amendment late Monday to the tax bill winding its way through the U.S. House of Representatives appears to fulfill President Donald Trump’s promise to close the so-called carried-interest loophole private-equity firms enjoy while also preserving many of the benefits they derive from it.

Since his days on the campaign trail, Mr. Trump has made repeated pledges to tax investment gains known as carried interest as ordinary income, which would do away with a rule allowing investment managers to pay a lower rate on a substantial...